Alcan makes bid to hold down aluminum costs

Alcan, one of the world's largest aluminum producers, says it is launching a research and development centre in France that will allow it to cut costs by up to 20 per cent.

Aluminum,, like plastic, is one of the key materials used in food packaging, mainly for beverages. However rising energy costs over the past year has led to suppliers hiking prices in a bid to maintain their margins. Faced with growing resistance from their customers to further price rises, companies such as Alcan have been finding ways to instead cuts costs as a means of maintaining a competitive position in the market.

The R&D centre in France is part of the company's target to  develop a more energy efficient and environmentally friendly operation. The company estimates the technologies will allow it to cut costs by up to 20 per cent, said Michel Jacques, president and chief executive officer of Alcan's primary metal unit.

"Alcan is aggressively pursuing breakthrough aluminum technologies to address rising energy costs and increased environmental expectations," said Jacques. "In line with Alcan's objective of maximising long-term sustainable value, this initiative will harness a combination of existing and emerging technologies, focused on  developing a more energy efficient and cleaner smelting process."

Alcan said it plans to spend about US$70 million in 2007 in the Rhône-Alpes region, where the centre is located. Alcan will conduct research two technologies it hopes to put in place at its plants worldwide.

Alcan said it has also further strengthened its technology in the Rhône-Alpes through its recent US$135mn acquisition of Carbone Savoie, which designs and produces cathode blocks. 

Cathode design is a critical factor in the performance of reduction cells in the aluminum electrolysis process, the company stated.

Aluminium packaging is used in a wide array of food products ranging from butter wraps, lidding and beverage cartons. Since the start of 2003 aluminium prices have doubled, to about $2,700 a tonne at the end of October.

The European Aluminum Foil Association (EAFA) said foil shipments went up by 3.5 per cent in the first nine months of 2006 reaching 660,700 tonnes. Demand was driven mainly by thicker gauges with plus 5.8 per cent, while thinner gauges grew by 2.9 percent.

"This positive trend is expected to continue for the coming months what shows the strong role of aluminium foil in today's and tomorrow's packaging markets," EAFA stated.

Meanwhile total Western European primary aluminium production decreased 5 per cent, to 340,046 tonnes, in April 2006 compared to the same month in 2005, according to the European Aluminum Assocation.

The European annualised primary production rate has shown a declining trend since December 2005.